Eni Hits Pay Dirt

An African oil discovery may change the company's fortunes.

The world energy and oil sector is making some big news: first, some of the biggest M&A deals and now a humongous gas discovery off the east shore of Africa. Oil major Eni(NYSE: E) reported its largest natural gas discovery off the coast of Mozambique, reaffirming the Rovuma Basin as a huge natural gas reserve.

A game changer?With a discovery of this magnitude, Eni expects the gas extracted to be enough to sustain a large liquefied natural gas (LNG) terminal able to export the gas to large Asian markets like China and Japan.

Concerns over Japan's Fukushima Daiichi nuclear plant incident have boosted both the price of and demand for LNG. Japan is the largest importer of LNG, followed by South Korea. India and China are catching up with soaring demand for LNG, which is expected to be about five times their current demand by 2020.

The sheer size of the Mozambique discovery is expected to lead to large-scale gas development with exports of LNG to regional and international markets, the company said. Eni has also recognized further possible oil and gas targets in the deep water off the shore.

The discovery strengthens Eni's position against competitors including Apache(NYSE: APA), Chevron(NYSE: CVX), and ConocoPhillips(NYSE: COP), which have already built their base in Australia to tap the Asian markets.

The high-quality find might also trigger a rush to the poor East African country, which until now has had only a small amount of gas production with no oil output.

Let's dig in deeperThe finding comes merely a month after Anadarko(NYSE: APC) raised its expectation of gas discovery offshore Mozambique by two-thirds. Eni, one of the largest operators in Africa, produces more than half of its total production in Africa and has major operations in Nigeria, Angola, Algeria, and Libya.

Betting big on Africa, the Italy-headquartered company has set its focus on upstream activities, especially in Mozambique, Togo, Ghana, and the Democratic Republic of Congo, where it announced plans to spend more than $50 billion over the next four years.

The discovery that came at the Mamba South 1 well is expected to hold huge quantities of gas, almost 340 million metric tons, and might even exceed predrilling estimates. After drilling and testing the South 1 well, the Mamba north area will be drilled.

The gas production facility will be ready in five to six years, turning Mozambique into a major gas exporter to Asia.

Foolish takeawayEni CEO Paolo Scaroni's statement gives the Foolish investor some clue as to what the find means to the company and what effect it can have on its fortunes: "This is a new stage in our conquest of Africa and a strong impulse for our business in the Pacific and Indian ocean area."

There could not have been a better time for Eni to stumble upon this reserve, as the demand for LNG is set to soar to dizzy heights in the U.S. Once the facility becomes fully operational, it will only add to the company's top-line growth. And the location off the East Africa coast also makes it feasible for Eni to tap the booming Asian LNG market. Click here to add Eni to your stock watchlist. Don't take your eyes off the stock.